Network Centrality and Managerial Market Timing Ability: Evidence from Open-Market Repurchase Announcements

Abstract

We find a U-shaped relation between long-run excess returns after buyback authoriza- tion announcements and firm centrality in the Input-Output trade flow network. As centrality may be non-linearly related to information asymmetry between firm insiders and outside investors, these results provide direct support for the market timing hy- pothesis of buybacks: while high centrality can increase information asymmetry due to information processing costs, low centrality can increase it due to information availabil- ity differences. Strikingly, unlike all past findings of positive abnormal returns in the literature on repurchases, significantly negative post-buyback announcement long-run excess returns are observed for some mid-centrality firms.

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